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29 April, 06:45

Kingston Co. uses the percentage-of-receivables basis to record bad debt expense.

It estimates that 1% of accounts receivable will become uncollectible.

Accounts receivable are $420,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,500.

(a) Prepare the adjusting journal entry to record bad debt expense for the year.

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  1. 29 April, 06:58
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    The journal entry to record the bad debt expense is shown below:

    Bad debt expense A/c Dr $2,700

    To Allowance for doubtful debts $2,700

    (Being bad debt expense is recorded)

    The computation of the bad debt expense is shown below:

    = (Accounts receivable * estimated percentage given) - (credit balance of Allowance for Doubtful Accounts)

    = ($420,000 * 1%) - ($1,500)

    = $4,200 - $1,500

    = $2,700
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